Nearly a year after SVB’s failure, a potentially bigger banking crisis is looming, this time centered on the troubled world of commercial real estate loans made on what are now half-empty downtown office towers across the country.
Richard “Dick” Kelly has been in banking for 40 years, and is putting that experience to the test as he steps into his latest role at MountainOne Bank – at a time when lenders everywhere are keeping a watchful eye on their commercial borrowers.
Even as 1 in 6 square feet of downtown Boston office space sits available for lease, local banks have said that any trouble in their urban office loan portfolios will be easy to contain. But questions are being raised about how much longer that will be the case.
S&P Global Ratings is expecting that American banks will still perform well this year and build capital as they face a slowed economy and tighter regulatory landscape in 2024.
A new academic paper claims nearly 1 in 2 office real estate loans in America have negative equity, raising questions about some banks’ financial health. But the state banking trade group is pushing back against the latter idea.
Greater Boston has the fourth riskiest loans on office properties among major U.S. metros, with nearly 30 percent falling into a category with elevated risk of default.
